Consumer Confidence on the Rise
In a promising sign for the housing market, Fannie Mae’s November Home Purchase Sentiment Index® (HPSI) rose to 75.0, continuing its steady climb and marking a 10.7-point increase year over year. While affordability remains a pressing concern, consumer sentiment has clearly improved, largely due to growing optimism that mortgage rates will decline in the coming year.
Kevin Tillmann, Lead Associate in Fannie Mae’s Economic and Strategic Research Group, emphasized that this growing confidence reflects a broader trend of consumer adaptation. As more households adjust to elevated home prices and mortgage rates, expectations are beginning to shift—creating cautious hope that 2025 could bring some relief.
Key Factors Driving the Sentiment Shift
According to Fannie Mae, several notable changes in consumer expectations helped push the HPSI higher:
- Mortgage Rate Optimism: A record 45% of respondents now believe that mortgage rates will decline over the next 12 months—up 6 percentage points from October. This optimism, despite still-high rates, has significantly boosted the overall sentiment index.
- Buying Conditions Still Challenging: Only 23% of consumers said it’s a good time to buy a home, up from 20% the previous month. While still a minority view, this marks a meaningful improvement compared to 14% in November 2023.
- Selling Sentiment Stable: The share of respondents who think it’s a good time to sell a home held steady at 64%. This suggests continued supply limitations, as many current homeowners remain hesitant to sell.
- Price Expectations Cooling: Fewer people expect home prices to rise—38% in November, down from 39%—while 25% now expect prices to fall. This shift in perception could lead some hesitant buyers back into the market.
- Mixed Signals on Income and Jobs: Confidence in household income and job security saw only slight changes. The share of respondents reporting significantly higher income fell slightly, and job loss concerns remained essentially flat.
A Gradual Acclimation to the Market
Mark Palim, Fannie Mae’s Chief Economist, noted that this improvement in sentiment is part of a broader pattern that began post-pandemic. After a dramatic run-up in prices during 2020–2022, consumers are slowly adjusting their expectations and behaviors to align with today’s market realities.
“Consumers are becoming acclimated to current mortgage rates and price levels,” Palim said. “We’re also seeing a growing number expect their personal financial situations to improve, which could, in turn, drive increased activity among potential homebuyers.”
What This Means for 2025
While high prices and elevated mortgage rates continue to create headwinds, the upward trajectory in consumer sentiment hints at possible stabilization ahead. If mortgage rates do begin to ease and wage growth outpaces home price appreciation, as some forecasts suggest, 2025 could see a modest uptick in housing activity.
Fannie Mae’s data also highlights the importance of consumer psychology in the housing market. When buyers and sellers believe better conditions are ahead, they’re more likely to re-enter the market—even if underlying economic conditions haven’t changed dramatically.
Though the road to affordability is still long, improved sentiment could be the first step toward a more active housing market in the coming year.